Highlights of the call

The company standalone revenue for Q3 FY12 declined by 2% at Rs 75.6 crore while net profit was up by 46% at Rs 18.2 crore.

The consolidated financials are not comparable on a Y-o-Y basis as the OOH business has been acquired by the Times Group. The company reported consolidated revenues of Rs 76.8 crore and net profit of Rs 18.4 crore.

The company garnered a core advertising decline of 2.5% in the radio business. In the top 8 stations, ad revenues were flat at Rs 52.7 crore. EBITDA for the legacy 8 stations stood at Rs 23.8 crore and had margin of 45.2% in Q3 FY12 (against 38.4% in Q3FY11).

The company has seen a margin expansion in the radio business, inspite of a 2.5% decline in ad revenues.

There has been weakness in certain higher yielding categories such as FMCG and telecom, due to which the company has had to utilize a greater part of its inventory to categories such as government advertising, and real estate, leading to lower yields. The management attributed it to the slowing economy where higher yielding customers have shied away from advertising particularly in the off festive month of November. According to the management, ad revenues were better in October and December 2011.

Inventory utilization in the top 8 stations stood at 89% and in the rest 24 stations stood at 62%. Inventory utilization for the overall network stood at 69%. The average realization for the network stood at Rs 9600 for 10 sec. slot, which is lower 8% Y-o-Y. This is primarily on account of change in mix of advertisers

In the private treaty accounting, the company has booked brand capital income to the tune of Rs 2.3 crore. Further, a net credit of Rs 3.4 crore has been booked in admin expenses on account of these private treaty deals. As private treaty book is starting to get monetized, such credits are expected to continue going forward. The total book size in the private treaties business is now at Rs 18 crore.

In the event management business, it had revenues of Rs 1.2 crore and an EBITDA of Rs 0.2 crore.

The Union Cabinet has approved the I&B Ministry's proposal for the Phase III policy of FM Radio. In Phase III, the government will auction 839 new private radio station licenses in 227 new towns and cities besides the existing 86 cities. The auction process is expected to take place in Q1FY13 and the respective stations would become functional only in FY14.

The company has a cash balance of Rs 174 crore

The company has signed a brand licensing agreement with Abu Dhabi Media Company and is launching the radio station in UAE on February 1, 2012. As a part of the agreement, Abu Dhabi Media would pay a fixed amount to the company for using the Radio Mirchi brand name and expected to accrue from Q4 FY12 itself. In addition, the company would aid in establishing the Radio Mirchi brand name in UAE, and would potentially earn a share of the business profits as well going forward

The management expects that advertising environment could remain weak for another quarter or two, and could improve on favorable government and monetary policy action. The company has said that it remains committed to increasing investments behind its brands and that the company could continue to enjoy benefits of withdrawals of private treaties provisions, although the extent of the same shall vary from quarter to quarter.